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Is GoodRx Holdings, Inc. (GDRX) A Good Stock To Buy?

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In this article we will check out the progression of hedge fund sentiment towards GoodRx Holdings, Inc. (NASDAQ:GDRX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is GDRX a good stock to buy? GoodRx Holdings, Inc. (NASDAQ:GDRX) has experienced a decrease in activity from the world's largest hedge funds in recent months. GoodRx Holdings, Inc. (NASDAQ:GDRX) was in 26 hedge funds' portfolios at the end of September. The all time high for this statistic is 41. Our calculations also showed that GDRX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let's check out the latest hedge fund action surrounding GoodRx Holdings, Inc. (NASDAQ:GDRX).

Glen Kacher of Light Street Capital

Do Hedge Funds Think GDRX Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GDRX over the last 25 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

More specifically, Abdiel Capital Advisors was the largest shareholder of GoodRx Holdings, Inc. (NASDAQ:GDRX), with a stake worth $360.7 million reported as of the end of September. Trailing Abdiel Capital Advisors was Silver Lake Partners, which amassed a stake valued at $144.9 million. Tiger Global Management LLC, Atreides Management, and Light Street Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rip Road Capital allocated the biggest weight to GoodRx Holdings, Inc. (NASDAQ:GDRX), around 9.27% of its 13F portfolio. Abdiel Capital Advisors is also relatively very bullish on the stock, designating 8.88 percent of its 13F equity portfolio to GDRX.

Since GoodRx Holdings, Inc. (NASDAQ:GDRX) has faced declining sentiment from hedge fund managers, we can see that there lies a certain "tier" of money managers that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, Christian Leone's Luxor Capital Group cut the largest stake of the "upper crust" of funds followed by Insider Monkey, worth close to $21 million in stock. Joseph Samuels's fund, Islet Management, also dropped its stock, about $10.8 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as GoodRx Holdings, Inc. (NASDAQ:GDRX) but similarly valued. These stocks are 10x Genomics, Inc. (NASDAQ:TXG), MarketAxess Holdings Inc. (NASDAQ:MKTX), DLocal Limited (NASDAQ:DLO), Repligen Corporation (NASDAQ:RGEN), Olaplex Holdings Inc. (NASDAQ:OLPX), WPP Plc (NYSE:WPP), and James Hardie Industries plc (NYSE:JHX). All of these stocks' market caps are similar to GDRX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TXG,28,963031,0 MKTX,29,730008,-2 DLO,19,480501,-1 RGEN,35,1499835,0 OLPX,52,710529,52 WPP,5,15930,-1 JHX,5,13962,1 Average,24.7,630542,7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $631 million. That figure was $1063 million in GDRX's case. Olaplex Holdings Inc. (NASDAQ:OLPX) is the most popular stock in this table. On the other hand WPP Plc (NYSE:WPP) is the least popular one with only 5 bullish hedge fund positions. GoodRx Holdings, Inc. (NASDAQ:GDRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDRX is 44.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately GDRX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GDRX were disappointed as the stock returned -0.1% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.